There are alot of stocks forming the same sort of patterns at the moment, and with the overall market down, shorting stocks can be a high probability choice.

CPU is forming a familiar pattern right now. It meets the basic criteria that indicates the sellers are in control and are likely to be around for a bit longer. Let’s take a look starting with the weekly chart.  The first indication sellers have taken control are the Lower Peaks (LP) and Lower Troughs (LT). The stock consistently fails to make a higher price each time it rallies, instead it makes new lows each time it falls. The blue highlighted area is a cross section of 3 strong weekly resistance lines which the stock is likely to respect and be pushed lower again.

Now to stack the odds in our favour, and look for more to give a higher probability of the stock falling. There is a Head and Shoulders (H&S) patter that has formed and been validated. (see previous posts for details on this pattern). The target area is about $4.00, which is also a key support level. The last point I would consider is Fibonacci levels. CPU is at a significant Fibonacci number now, which has a high success rate of acting as a strong resistance.

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